Category: Business

What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected” : You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important ; knowing its boundaries, however, is vital.

I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47$ U.S. Steel at 39$ and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like ; then when the fielders are asleep, you step up and hit it.

The trick is, when there is nothing to do, do nothing.

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards – so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines : if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.